Nikkei rebounds as investors buy on dips; Greece, China in focus

* Retail investors find buying opportunities after market
dipped - analysts
* Prolonged weakness in China market could become real risk
to Japan - traders
By Ayai Tomisawa
TOKYO, July 7 (Reuters) - Japan's Nikkei share average
rebounded on Tuesday as investors bought stocks on the dips, but
uncertainty over Greece and China's efforts to rescue its
slumping stock market capped gains in Tokyo.
The Nikkei share average gained 1.4 percent to
20,399.82 by mid-morning, after tumbling 2.1 percent on the
previous day as a Greek vote to reject austerity measures
spooked the market.
But after the Japanese market dipped, valuations have become
more attractive, with the Nikkei's price-to-earnings ratio
falling below 16, while other developed markets are seen as more
expensive. The S&P 500 's PER is around 20.3, according to
Thomson Reuters StarMine.
"Retail investors who missed the wave when the market was
rising seemed to have found this dip a buying opportunity," said
Takuya Takahashi, a strategist at Daiwa Securities.
He said investors would remain focused on Greece as Athens
seeks a new debt deal with its European creditors, and ahead of
a July 20 deadline for a Greek repayment to the European Central
Bank.
"Although repercussions to the global market is unlikely, we
can't be too optimistic that the Japanese market won't get sold
at all," he said.
Financials were bought back, with Mitsubishi UFJ Financial
Group and Mizuho Financial Group rising 1.1
percent and 1.4 percent, respectively.
Insurers were also rising, with Tokio Marine Holdings
surging 3.5 percent and Dai-ichi Life Insurance
soaring 2.0 percent, respectively.
Exporters were in demand, with Toyota Motor Corp
and Panasonic Corp gaining 0.6 percent and 1.5 percent,
respectively.
Market participants said that volatility in the Chinese
market was in focus as well.
On Monday, Chinese stocks were supported by unprecedented
emergency measures from Beijing but trading remained highly
volatile. Shares fell on Tuesday, throwing into question the
effectiveness of government moves to stabilise the
market.
"We need to continue monitoring China shares carefully
because to Japan, China could be a real risk if its market falls
further," said Norihiro Fujito, senior investment strategist at
Mitsubishi UFJ Morgan Stanley Securities.
He said prolonged weakness in its stock market could lead to
a slowdown in consumption among Chinese consumers, and Japanese
shares which have high exposures to China may be affected.
The broader Topix gained 1.2 percent to 1,640.00,
and the JPX-Nikkei Index 400 advanced 1.2 percent to
14,816.88.
(Editing by Kim Coghill)